3 Ways to Start a Business When You’re Already Drowning in Debt

Ever since I was young, I’ve had an entrepreneurial spirit. When I was 15 years old, and all my friends were working at supermarkets and fast-food joints, I started a successful landscaping company. I kept it going until I graduated from high school and moved away for college. Then, during my freshman year in college, I started a T-shirt company with a roommate.

When I graduated from college, though, I took $74,000 in student loan debt with me. It was the height of the financial crisis, so I had a hard time finding a job. Eventually, I took an unpaid internship in Ghana to bolster my resume, where I did some startup consulting for women entrepreneurs.

But even with that experience and a lot of searching, I couldn’t find a good job back home. So, I reached out to a friend who was living in Asia at the time, and I agreed to move there to start a website development company.

With an inconsistent income, though, I had my various student loans in deferment and forbearance. As a result, my student loan debt balance ballooned to $107,000, and I needed to find creative ways get funding for my company.

If you’re experiencing a similar scenario, read on to learn the best ways to start a business while burdened with debt.

Related: How Debt Stacking Can Threaten Your Business

3 ways to fund your startup when you’re deep in debt

If your business is in its infancy, you might have a hard time finding a small business loan. With little or no revenue to speak of, lenders might want a personal guarantee before approving an application. But if you’re already drowning in debt, even that might not be possible.

If you’re in this position, here are three alternatives to consider.

  1. Fund it with personal cash flow

When I moved to Asia to start a website development company, the idea was to take advantage of the low cost of living. That way, the company could have more time to grow. But I only had a few hundred dollars in savings, so I still needed to find a way to not only get by, but also to get capital for the business.

Our solution was to pitch a content idea to travel agencies. We’d travel around the continent and shoot videos and provide content in exchange for a monthly income. After pitching to about 20 agencies, we found one that was interested. We earned $3,000 a month for the gig.

Through this opportunity, we earned enough to build our company, reaching $200,000 in annual revenue in three years.

  1. Look for an accelerator

In 2012, my business partner and I learned about a startup incubator called Start-Up Chile. We applied with a developer with whom we had been working, listing him as our CTO. Our application was accepted, and we received an offer for $40,000 of equity-free funding.

In exchange, we flew down to Chile to help with local economic development, for example, giving presentations on SEO and website development. When we were done with the program, we had a minimum viable product, a working prototype and some early customer traction for a new business.

Next, we applied for another incubator in New York City and received another $25,000 in funding in exchange for 7 percent equity. In the end, we used these accelerators to start a successful online business.

In addition to accelerators, you can also reach out to venture funds and angel investors to get the money you need. You can connect with these resources through numerous websites, such as F6S and AngelList.

  1. Crowdfund with Kickstarter

If your startup is going to be product-based rather than service-based, another option is to put out some feelers with a Kickstarter campaign. If your product idea is good enough, you can get a lot of equity-free financial support from potential customers.

Some of the most popular Kickstarter campaigns have generated millions of dollars in funding. For example, the Pebble Time smartwatch received $20.3 million in funding, and the Fidget Cube netted $6.5 million.

Here are a few tips for creating a successful crowdfunding campaign:

  • Set a reasonable funding goal. Research successful Kickstarter campaigns with similar products and set a goal based on what you find
  • Create appealing awards to entice backers to pledge money
  • Get potential backers’ attention with a professional video of your product
  • Connect with online influencers who might be able to help you promote your campaign

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Don’t forget about your debt

While many people look first to small business loans to get their startup off the ground, I decided to look elsewhere. The result has been two successful businesses and an opportunity to pay off $107,000 in student loan debt.

Regardless of the type of debt you have, it’s critical that you continue to work toward paying it down along the way. My biggest mistake was to let my student loan debt get out of hand, and I ended up with $33,000 more debt by the time I decided to tackle the problem.

It is possible to work toward paying off your debt while building your business. Getting your personal finances under control could mean that you’re able to focus more on your startup.

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